AngloGold pays dividend first time in 3 years

After more than three years of non-payment of dividends to its shareholders, mining giant AngloGold Ashanti is to resume payments after lower operating and interest costs helped it nearly double it cash flow.

At the end of December 2016, AngloGold’s cash flow doubled to US$278m which led to the company declaring dividend of approximately US$0.10 a share for 2016.

Adjusted Headline Earnings (AHE) were US$143m, or US$0.35 per share, compared with US$49m, or US$0.12 per share in 2015.

The sharp improvements in free cash flow and earnings by AngloGold Ashanti were achieved through strong ongoing focus on cost and capital discipline, as well a higher gold price.

It will be recalled that the mining firm has since 2013 used ‘self-help’ measures including asset sales and efficiency improvements to reduce debt and improve balance sheet flexibility without diluting shareholders. It also, at the same time, improved safety and cash-flow margins across its 17-mine portfolio.

This led to the company prioritizing inward investment in high-return brownfield projects over acquisitions, as it seeked to improve the quality of its production base and extend mine lives.

Chief Executive Officer of AngloGold Ashanti Srinivasan Venkatakrishnan in a statement said, “Production from our operations delivered a strong turnaround in the second half of the year. We have again generated strong cash flows despite a volatile gold price, which has further strengthened our balance sheet and improved flexibility.”

“We will continue to deliver on our strategy through the development of high-return, brownfield projects in order to continue to improve the underlying quality of our portfolio,” he added.

AngloGold Ashanti delivered a steady operating and financial performance in the second half of 2016, with production coming in at 1.9Moz compared to 2.0Moz in 2015. This operating result was achieved despite safety-related stoppages that impacted output by roughly 60,000oz in SA, planned lower grades at Geita and Tropicana, and the Obuasi mine having been on care and maintenance for last year.

These negative production factors were partly offset by continued focus on tight cost control, a 14% higher realised gold price, and weaker currencies in some jurisdictions.

Production guidance for 2017 year is estimated to be between 3.6Moz and 3.755Moz. Total cash costs are estimated to be between $750/oz and $800/oz and AISC between $1,050/oz and $1,100/oz at average exchange rates against the US dollar of 14.25 (Rand), 3.40 (Brazil Real), 0.75 (Aus$) and 16.50 (Argentina Peso), with oil at $58/bl average for the year, based on market expectations.

Capital expenditure is anticipated to be between $950m and $1,050m, with reinvestment at: Cuiaba, in Brazil, where a greater rate of ore reserve development is expected to improve mining flexibility hampered by geotechnical challenges in recent years; Iduapriem in Ghana, to strip waste rock from the Teberebie ore body to extend mine life, and lower cash costs; Geita, in Tanzania, to replace the mine’s original 20-year old power plant to ensure reliable electricity supply, and also continue the ramp-up of underground production in advance of depletion of open-pit ore in future; at Sunrise Dam, in Australia, where investment in plant modifications are expected to improve gold recoveries; and at Kibali, in the DRC, where additional ore reserve development will be conducted ahead of a ramp-up in underground production.

Both production and cost estimates assume neither labour interruptions or power disruptions, nor changes to asset portfolio and/or operating mines and have not been reviewed by our external auditors.